Formosa Plasma Expects to Become World No. 1 PDP Maker

Formosa Plasma Display Corp., a maker of plasma-display panels (PDPs) for TVs and a member of the Formosa Plastics Group (FPG), reported recently that its PDP products had passed all certification requirements and that deliveries to a growing number of customers in Taiwan and elsewhere would soon begin.

This is good news, according to a senior Formosa Plasma official, because Taiwan will face a serious shortage of PDPs in the second half of this year as demand far outpaces supply and few newcomers will begin producing panels in the near term.

To meet the burgeoning demand, Formosa Plasma has decided to speed up its second-stage expansion by pouring NT$15 billion (US$434 million at NT$34.6:US$1) into new production lines. When completed in 2005, this expansion will boost the company's monthly production capacity to 70,000 panels and make Formosa Plasma the world's top PDP producer, leapfrogging Samsung and LG of South Korea, Fujitsu of Japan, and Chunghwa Picture Tubes of Taiwan.



FPG president Lee Chih-tsun notes that PDP TVs are rapidly gaining popularity in the home market as prices decline sharply. Such TVs were seen until recently only in commercial applications, Lee comments, including large-size displays at shopping malls, department stores, and large corporate conference rooms.

Lee reports that the Formosa Plasma plant in the Mailiao Industrial Zone, in southern Taiwan, currently concentrates on 42-inch TV PDPs. Production at a monthly volume of 10,000 panels got under way in April this year, and panels were sent to local PDP TV makers—Sampo Co., Vtek Displays Co., Delta Electronics, AmTRAN Technology, and Maistek Corp., among others--for final testing. As a result, Lee says, his firm has enough orders on hand to keep its production lines busy at least until the end of the year. Production at an expanded rate will begin in August.

The global demand for PDP TVs is expected to grow rapidly over the next few years and to boom in 2006, mainly because the United States will complete a full switch to digital TV that year. Lee believes that PDP and liquid crystal display (LCD) models will soon become the mainstay of the large-screen and small-screen TV markets, respectively.

Lee also says that FPG will soon try to set up a strategic alliance with one or more home appliance makers in Taiwan, making it better able to compete with rivals in Japan and South Korea that are already vertically integrated.


Numerous Advantages


PDP TVs have a number of advantages over conventional models, Lee notes, including higher picture quality and resolution, lower power consumption, and numerous digital functions that obviate the need for peripheral equipment. Prices are now high, but are sure to come down in the years ahead.

The president also says that PDP TVs are moving in the direction of higher resolution and higher size (42 inches and over), while LCD models focus mainly on the under-30-inch market. Thus they two types of panels will not complete head-to-head, but will complement each other.

Nevertheless, PDP TV makers in Taiwan will face fierce competition in the future, especially from South Korean and Japanese rivals. Most of these competitors are large international brands with the advantage of established global sales channels and vertically integrated manufacturing capability. Formosa plasma will do its best to help local manufacturers compete, Lee stresses, by cutting panel prices and integrating with strategic partners.

In this effort, Lee explains, his company will achieve better economies of scale when its second-stage expansion is completed in 2005, thus keeping prices down. It will also make use of FPG's group resources to develop better, cheaper PDP parts.

Despite the continuing high level of PDP prices, industry sources estimate that 1.75 million PDP TVs will be sold this year. This will be a huge increase over the 650,000 units moved in 2002. In Taiwan, sales are forecast to soar from the approximately 5,000 PDP TVs last year to 11,000 units this year.

The sources point out that four mainstream digital-TV platforms have emerged: PDP TV, LCD TV, LCOS (liquid crystal on silicon) rear-projection TV, and DLP (digital light processing) rear-projection TV.

The production of LCOS and DLP TVs is still limited because the necessary chipset technology is not fully mature. Thanks to technological breakthroughs in the development of large-size panels, however, PDP models are gaining popularity in the high end of the market, and more and more competitors from Europe, the U.S., Japan, and mainland China, as well as Taiwan, are joining the competition.

With Formosa Plasma's production volume of PDPs expected to reach an annual volume of about 840,000 in 2005, more local manufacturers will also join the fray and form a large cluster of PDP TV makers during the next few years.

Major PDP Panel Makers'Capacity
Company	Monthly Capacity (panels)	Note
Formosa Plasma	70,000	Scheduled in 2004
Fujitsu Hitachi Plasma Display (FHP)	30,000	Formosa Plasma's Japanese partner
Orion	30,000
Samsung	30,000	New Capacity scheduled in 2005
LG	25,000	New Capacity scheduled in 2005
Matsushita	20,000	New Capacity scheduled in 2004
NEC	15,000
Pioneer	10,000	New Capacity scheduled this year
Chunghwa Picture Tubes	7,000	New Capacity scheduled this year
Sources: The companies.